Correlation Between Microsoft and Monarch Casino

Can any of the company-specific risk be diversified away by investing in both Microsoft and Monarch Casino at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Monarch Casino into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Monarch Casino Resort, you can compare the effects of market volatilities on Microsoft and Monarch Casino and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Monarch Casino. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Monarch Casino.

Diversification Opportunities for Microsoft and Monarch Casino

-0.27

Correlation Coefficient

Microsoft  Monarch Casino

Very good diversification

The 3 months correlation between Microsoft and Monarch is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Monarch Casino Resort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Casino Resort and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Monarch Casino. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Casino Resort has no effect on the direction of Microsoft i.e., Microsoft and Monarch Casino go up and down completely randomly.

Pair Corralation between Microsoft and Monarch Casino

Given the investment horizon of 90 days Microsoft is expected to under-perform the Monarch Casino. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than Monarch Casino. The stock trades about -0.11 of its potential returns per unit of risk. The Monarch Casino Resort is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,810  in Monarch Casino Resort on December 30, 2024 and sell it today you would earn a total of  29.00  from holding Monarch Casino Resort or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Monarch Casino Resort

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Monarch Casino Resort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monarch Casino Resort has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Monarch Casino is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Microsoft and Monarch Casino

The main advantage of trading using opposite Microsoft and Monarch Casino positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Monarch Casino can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Monarch Casino will offset losses from the drop in Monarch Casino's long position.

The idea behind Microsoft and Monarch Casino Resort pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.